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Jay Peak bombshell

I've been speculating that something has gone off the rails regarding Jay's EB-5 fundraising. My assumption was that it was largely due to competition from more urban projects. I also had a suspicion that part of the problem was due to the dissatisfaction of early investors. I had stated earlier that Jay's advantage of being an early EB-5 player could be coming back to haunt them because people can now look at the rate of return early investors are receiving.

The basic summary was that JPR quietly changed the terms of the deal...from 5 year exit to 15 year exit plan. The internal limited partnership documents, apparently, allowed them to make this change without notice or consent of the EB-5 investors. The investors are pissed.

Keep in mind that even if it was legal to do this, potential future investors are going to draw their own conclusions when they do their due diligence. To me, that's one of the most important aspects of this story and why I've suggested that the Jay/Burke EB-5 train may have just imploded.

If I am reading the article correctly, here is what it boils down to:
1) Jay, while not guaranteeing a specific ROI, painted a much rosier picture than reality.
2) To hedge against any risk, the investors were led to believe that they would have an equity interest in the hotel.
3) The investors, without any knowledge, had their equity interest taken away and became unsecured creditors.
4) The exit strategy requires the investors to believe that they will get a huge balloon payment down the road. Investors are skeptical of that promise.
5) The new shit-has-hit-the-fan deal gives them an equity interest, but what did they have to give up to get it? The article does not say. Do they have to give up their right to sue? And even if they do re-establish an equity interest, are they now BEHIND other secured creditors? And what exactly is their equity interest in? The article suggests that it's in the resort itself. With aging equipment and potential senior creditors, does that really provide a substantive equity interest?

Another key element to this story is that investors may lose confidence in Vermont's Regional Center itself - which will screw all sorts of other proposed EB-5 projects.

The investors should have read the fine print stating that there was NEVER a guarantee that they would get any money back. This is actually a better deal where they will get ALL their money back. If they don't realize what investing means then too f'n bad for them. They wanted to come to the US they got that plus they will get their money back. If they don't like it oh well. Will it make future EB-5 green card getters read English? Maybe.

Keep in mind that even if it was legal to do this, potential future investors are going to draw their own conclusions when they do their due diligence. To me, that's one of the most important aspects of this story and why I've suggested that the Jay/Burke EB-5 train may have just imploded.

If I am reading the article correctly, here is what it boils down to:
1) Jay, while not guaranteeing a specific ROI, painted a much rosier picture than reality.
2) To hedge against any risk, the investors were led to believe that they would have an equity interest in the hotel.
3) The investors, without any knowledge, had their equity interest taken away and became unsecured creditors.
4) The exit strategy requires the investors to believe that they will get a huge balloon payment down the road. Investors are skeptical of that promise.
5) The new shit-has-hit-the-fan deal gives them an equity interest, but what did they have to give up to get it? The article does not say. Do they have to give up their right to sue? And even if they do re-establish an equity interest, are they now BEHIND other secured creditors? And what exactly is their equity interest in? The article suggests that it's in the resort itself. With aging equipment and potential senior creditors, does that really provide a substantive equity interest?

Another key element to this story is that investors may lose confidence in Vermont's Regional Center itself - which will screw all sorts of other proposed EB-5 projects.

It will be interesting to see how this plays out.

I think that the larger message is clear: they are very ambitious and are having a hard time getting the money. That is no surprise considering the fact that they are now facing stiffer competition for EB-5 money. It also explains they recent issue with Pomerleau and the airport. I know that folks argue that the projects are siloed, that there is no need for concern, etc., but I think that the theme is clear...they are having trouble getting money to make things happen.

As to the Regional Center, folks will be skeptical with that as well. I think the "turning of the head" issue is part of a bigger issue with Vermont politics and business right now though.

The investors should have read the fine print stating that there was NEVER a guarantee that they would get any money back.

I think the issue is the change and how it was done.

This is actually a better deal where they will get ALL their money back. If they don't realize what investing means then too f'n bad for them. They wanted to come to the US they got that plus they will get their money back. If they don't like it oh well. Will it make future EB-5 green card getters read English? Maybe.

The plan assumes that JPR will be able to make that big balloon payment. I'm always skeptical of those.